An occasional glimpse into the workings of the Scottish Parliament and the Scottish Executive (or comments on anything else that takes my fancy).

24 March 2016

In defence of the wrinklies

Far from sure that this is entirely justified but it is a useful counterblast to the apparently universal belief that pensioners are favoured over younger generations:

The argument is made by respectable think-tanks, such as the Resolution Foundation and the estimable Institute for Fiscal Studies, that pensioners have never had it so good. Their figures show that the incomes of retired people have risen faster in recent years than those of younger people in work. But this does not mean that retired people are, even on average, well-off. The statisticians are talking percentage rises from a disgracefully low base.

The income of most pensioners, in real money, is still considerably lower than that of most working people. Nor are their outgoings automatically lower. Indeed, an OECD report published late last year found that the UK state pension was “one of the worst in the world”, with only Mexico and Chile coming lower among industrialised countries.

Pensioners have also had a raw deal from the financial crisis, though a different raw deal from that suffered by those in work. While wages have, until very recently, stagnated or fallen, pensions have slowly risen. But the savings that today’s pensioners were encouraged to make while they were working to supplement their still-paltry pension now produce almost no income at all.

The low interest rates that allow working people to take out higher mortgages (and fuel higher house prices) penalise pensioners who saved – whether in bank accounts, Isas or private pensions. If interest rates go into negative territory, their plight will be even worse. Contrast this with the Lifetime Isas announced by the Chancellor in his Budget. These will pay an effective interest rate of more than 20 per cent (£1,000 for every £4,000 saved for a house or a pension). This is a rate most pensioners – told to “shop around” for a rate higher than 0.5 per cent – can only dream of.

Nevertheless, it surely cannot be denied that some pensioners (not excluding me) are doing rather better than alright. Case for means-testing some of the pensioner benefits?